Monthly Archives: January 2015

No, the Big Five are not a cartel and it really ignores reality to label them as one

30 January 2015

From veteran publishing consultant Mike Shatzkin:

One of the best-attended breakout sessions of Digital Book World 2015 was the discussion called “Should Amazon Be Constrained, and Can they Be?” which shared the very last slot on the two day program. That conversation was moderated by veteran New Yorker journalist Ken Auletta, and included Annie Lowrey of New York Magazine, thriller author Barry Eisler, and Barry Lynn of the New America Foundation.

It turns out that the two Barrys, who have pretty much diametrically opposed positions on Amazon (Lynn wants them investigated by the DoJ as a competition-stifling monopoly; Eisler casts them, for the most part, as the heroes of the book business’s digital transition) have a common position on the Big Five publishers. They refer to them as a “cartel”. Eisler is sneeringly dismissive of “New York”, which he refers to the way Republicans of the 1980s referred to “Moscow”, as an obvious pejorative. He appears befuddled by how anybody interested in the well-being of authors and the reading public could take the side of these publishers who maintain high prices for books, contract with authors to pay them smaller percentages of sales than Amazon does (either through Amazon’s own publishing operations or through their self-publishing options), and notoriously reject a very high percentage of the authors who come to them for deals.

Perhaps because the focus was Amazon, perhaps because Eisler was both emphatic and entertaining in his roasting of the publishing establishment, and perhaps because the facts to defend them are not well known.

. . . .

I am not certain that Amazon can or should be constrained, but I am damn sure that the Big Five publishers are not villains, and they are certainly not a cartel. They do seem to be extremely poor defenders of their own virtue but they are doing yeoman work maintaining the value in the old publishing model — for themselves and for authors — while adjusting to changes in their ecosystem that require that they develop strong B2C capabilities while maintaining their traditional B2B model, the death of which has been greatly exaggerated. If I’d been on that stage, the discussion of Amazon would have been diverted when the trashing of the big publishers began.

I took the step of confirming in an email exchange my recollection of the counts in Eisler’s very entertaining, persuasive, and unchallenged indictment of the big publishers.

1. Their basic contract terms are all the same, which it felt at the time he was suggesting demonstrated collusion, but which in our subsequent exchange he clarified he interprets as evidence of “asymmetrical market power and a lack of meaningful competition”;

2. They pay too low royalties on ebooks, which he also attributes to their “asymmetrical power” and “an implicit recognition that publishers come out ahead if they don’t compete on digital royalties”;

3. They only pay royalties twice a year, rather than more frequently or more promptly, which Eisler also attributes to a lack of competition;

4. The term of big publisher contracts is normally “life of copyright”, which Eisler calls “forever terms”

. . . .

First of all, the Big Five have plenty of competition: from each other, as well as from smaller niche publishers who may but be “big” but certainly aren’t “small”. (That is why the big ones so often buy the smaller ones — they add scale and simultaneously bring heterogeneous talent in-house). They are all quite aware of the authors housed elsewhere among them who might be wooable. In fact, since we have started doing our Logical Marketing work, we have done several jobs which were big author audits commissioned by publishers who wanted to steal the author, not by the one which presently has them signed.

. . . .

But the big flaw in Eisler’s logic is the same one that dooms Hugh Howey’s“ Author Earnings” project to irrelevance: the assumption that the per-copy royalty terms and rights splits are the most important element of publishing contracts. In fact, they’re not. Actually, those terms matter in 20 percent or fewer of the agented author contracts with the Big Five. Why? Because the agents get the publishers to pay advances that don’t earn out!

In fact, I have been told by three different big houses what they calculated the percentage of their revenues paid to authors amounted to. We could call that thetrue royalty rate. The three numbers were 36, 40, and 42 percent. That includes what they paid for sales of paperbacks, all of which carry “stipulated” royalties of well less than 10 percent of the cover price (and therefore below 20 percent of revenue).

Take that on board. Big publishers are paying 40 percent of their revenue to authors!

. . . .

Not only were the authors’ collective royalty rates much higher than contracts stipulated, the authors got most of that money in advance, eliminating the authors’ risk. The only contracts on which the royalty terms matter are those that do earn out (and, arguably, those that are close). For all the others, most of Eisler’s list of complaints is irrelevant. And, for the record, I have never heard an author complain about that show of confidence, the work that follows in helping him or her reach an audience (which benefits all involved), nor the cash upfront.

More frequent accounting doesn’t matter if you aren’t owed any money. And if the solution to “forever” contracts were that you could buy your way out by paying back what you got in advances that your book didn’t “earn”, how many authors would do that?

. . . .

First of all, the standard terms in big house contracts are almost always more generous than the terms in smaller publisher contracts. Few — if any — of the smaller ones pay a hardcover royalty as high as 15 percent of list. Although higher digital royalties can sometimes be found, usually those are from publishers who have little capacity to deliver print sales, so digital royalties is all you’re going to get. (That might be okay for a romance novel where a big majority of sales could be digital. It would be disaster for the author of just about anything except genre fiction.) And some smaller publishers actually pay less than 25 percent for digital royalties.

So the Big Five terms are generally better and they routinely pay agented authors advances that no other publisher would attempt to match.

But, beyond that, the idea that they are a “cartel” (a characterization enthusiastically seconded by Amazon critic Barry Lynn after it was introduced by Amazon supporter Eisler), is really preposterous. In fact, the Big Five are, to varying degrees, federations of imprints that even compete internally for books, sometimes to the extent that they will bid against each other when an agent conducts an auction.

Link to the rest at The Shatzkin Files and thanks to Daniel and many others for the tip.

Everybody who believes that 80% of the authors publishing with Big Publishing are not expected to earn out their advances, please raise your hands.

And the price-fixing that the Price-fix Six engaged in with Amazon is the very definition of cartel behavior.

Server Problems

30 January 2015

Due to hosting problems, The Passive Voice was down for an hour last night. A runaway program not associated with TPV ran amok, filled up the hard drive and crashed the server.

This morning, PG was locked out of any administrative functions for the blog due to issues arising from the server crash last night. He is now an expert on all the various methods of resetting an administrator’s password on WordPress.

Fortunately, all the nooks and crannies of TPV are once more available to PG and he will add some additional blog posts shortly.

One of the many reasons for today’s frustrations is that a lot of people have sent good tips this morning.

We are volcanoes

30 January 2015
Comments Off on We are volcanoes

We are volcanoes. When we women offer our experience as our truth, as human truth, all the maps change. There are new mountains.

Ursula K. Le Guin

Indie Authors on Campus

30 January 2015

From Publishers Weekly:

Bob Hoyt, an instructor and director of the Health Informatics program at the University of West Florida, knew his students were struggling with the high cost of their textbooks. The nominal price of college textbooks has “risen more than fifteenfold” since 1970 — which is three times the rate of inflation — according to a recent article in the Economist, while the Wall Street Journal notes the cost of new print textbooks has risen, on average, about 6% a year for the last decade. Hoyt was also frustrated that new developments in his field meant information in the books was already obsolete by the time they were published. “There were no textbooks that were up to date or easy to read,” Hoyt says. To solve the problem, he decided to create his own, with associate editor and adjunct instructor at the University of West Florida Ann Yoshihashi, and self-publish it on Lulu.com — and sell it for about a third of the cost of a regular textbook.

Seven years later, Health Informatics: Practical Guide for Healthcare and Information Technology Professionals (about using IT to improve health care) is in its sixth edition and is taught at more than 200 universities in 30 countries. The book has sold about 12,000 copies and has been endorsed by the American Medical Informatics Association. While the sales figures don’t come close to the stratospheric success usually associated with self-publishing success stories, there are signs that self-published textbooks could be the start of a new trend with the potential to upend the $7 billion college-textbook industry.

. . . .

Lulu President and CEO Tom Bright says it’s precisely authors like Hoyt and Yoshihashi—authors he calls “content entrepreneurs”—that are leading the next successful wave in self-publishing. Bright notes that content entrepreneurs are primarily business owners or professionals—people for whom writing isn’t their primary career.

Bright says authors of this sort sell 20 times as many books on Lulu as fiction writers do. “We’ve found that top nonfiction and education books generate 24% more net sales per title than top books in other genres,” he adds.

. . . .

 But Yoshihashi had done her research and determined that self-publishing held a number of advantages for them over traditional publishing. These advantages included the fact that they were able to keep a larger share of the profits, the ability to control the price of the book, the quick turnaround time from submission to publication, and the ease with which they could update the book and republish it. “We also can say when we would like older editions to be no longer printed. You don’t have this type of control with traditional publishers,” he notes.

. . . .

Hoyt feels that the rising cost of college textbooks has helped their affordably priced volume become so successful. With the Kindle edition priced at $32.95 and the print edition at $69.95, the book is considerably less expensive in both formats than most textbooks available for purchase. Hoyt says his students appreciate that he took pricing into consideration when self-publishing: “They can buy a chapter at a time so they don’t have to buy the entire textbook if they don’t need it. This, he notes, “is very important given the financial burden to students and burgeoning textbook prices.” And while renting textbooks has become a popular option for students who can’t commit to purchasing the book, Hoyt notes that buying their textbook in e-book format is actually cheaper than renting it.

But, even with this competitive pricing, the profits add up quickly—Lulu authors keep 80% of the income from print sales and 90% of digital sales. With the proceeds generated from the sale of the volume, the authors have donated more than $100,000 to the University of West Florida and established grants of more than $25,000 to support health informatics educational programs. Self-publishing, Hoyt says, let them control the price of the book to get ahead of the competition while keeping costs low for their students.

Link to the rest at Publishers Weekly

Amazon earnings: 45 cents a share, vs. expected EPS of 17 cents

30 January 2015

From CNBC:

Amazon.com blew past Wall Street’s earnings expectations on Thursday as holiday sales climbed some 15 percent, sending the company’s shares rallying 14 percent in after-hours trading.

Amazon issued fourth-quarter earnings of 45 cents a share, down from 51 cents per share a year ago, but soaring past expectations of 17 cents.

Revenue rose 15 percent year-over-year, to $29.33 billion, but that trailed analysts’ estimates of $29.67 billion. Excluding currency headwinds, the company said revenue increased 18 percent.

Amazon Prime, its annual membership program that costs $99 a year, was a bright spot for the e-commerce giant.

The company said worldwide Prime memberships grew 53 percent last year—up 50 percent in the U.S. and “even a bit faster” abroad.

“When we raised the price of Prime membership last year, we were confident that customers would continue to find it the best bargain in the history of shopping,” said Jeff Bezos, founder and CEO of Amazon. “[I]n 2014 alone we paid billions of dollars for Prime shipping and invested $1.3 billion in Prime Instant Video.”

. . . .

Amazon Web Services, the company’s cloud business, grew about 90 percent, year-over-year, to about 1 million active customers. The company plans to start bulking up that area sometime this quarter.

Link to the rest at CNBC

New publishing trends reshaping reading

30 January 2015

From The Chicago Tribune:

In November, a pair of technology journalists issued the latest in what seems to be a constant stream of announcements proclaiming the start of a book publishing revolution. First, co-authors Jason Hiner and Lyndsey Gilpin said they would crowdfund their project, asking individuals to donate toward a $10,000 goal in exchange for free tote bags, book copies and, for $500, a chance to chat with the authors by phone.

. . . .

“Books have barely been touched by the digital revolution,” Hiner says in a video on the authors’ Indiegogo crowdfunding site. The publishing industry moves slowly. The technology world Gilpin and Hiner are writing about moves quickly. In the gap, anything a book says can be canceled by simple forward momentum while the author waits for the presses to roll.

Compared to what has happened in the music and newspaper industries, digital technologies are fueling more evolution than revolution in book publishing. But change is well under way, starting with the dizzying rise in self-publishing, the rapid growth of all-you-can-read book subscription services, a surge in crowdfunded publishing, and the growth of the e-book.

Mark Coker’s company, Smashwords, owes its existence to e-publishing. Coker launched it after a novel about the soap opera business he co-authored with his wife, Lesleyann Coker, left publishers cold.

“The more I thought about it, the more frustrated I got,” Coker says. Publishers told his agent that “Boob Tube” was a dud because soap-opera-based books always flopped. That’s what the record showed. But Coker wondered how much publishers really knew. “The vast majority of their books fail,” he says. “The dirty secret of the publishing industry is, at the end of the day, they’re really just throwing spaghetti against the wall.”

Link to the rest at The Chicago Tribune

What I Get Paid For My Novels: Or, Why I’m Not Quitting My Day Job

29 January 2015

From author Kameron Hurley:

In the spirit of honesty and transparency that’s often sorely lacking in the literary world, here’s what I’ve been paid for my novels for the last 7 years.

Many of you don’t realize I’ve had writing contracts for 7 years! That’s because the first contract I ever signed was canceled. They paid it out anyway. But it was nearly three more years before those books saw print, so my professional writing career didn’t start until 2011.

Needless to say, I’ve had a day job this entire time because I like money and also paying for health insurance and food and paying off student loans.

This is the first year that book advances, royalties, and my day job salary will all combine to bring me up over the $100,000 a year mark (likely $105,000 or so, depending on outstanding items).  I was pretty much destitute in 2007 – laid off, sleeping in a friend’s spare bedroom, living completely on credit cards – so 7 years from penniless to $100k is a big milestone for me, and I intend to celebrate it by paying off a student loan.

The goal is to be debt-free (aside from the mortgage) in two years.

I also worked relentlessly to get here, and I’m aware it could all blow up tomorrow.

About 75% of that money I’ll make this year, still, comes from my day job. The numbers below show why.

15% of all of these amounts went to the agent who negotiated the deal.

Another 15-20% went toward taxes.

. . . .

[After listing advances and rights sales for various books]

You can see the advances there looking pretty grim after the 2008 publishing crash. Prior to the crash, there were a lot more people getting $20k advances and saying, “Hey, yeah, that’s OK,” instead of “Thank GOD.” They became harder to get after 2008.

. . . .

This is a tough business to stay in, especially if you don’t have a solid day job or a partner with same. I hear folks say that the 4-5 book place is where a lot of folks start to make money, and it’s true that this is the first year I could earn what I’d call a living wage if I quit or was laid off. But I know too much about publishing – and the changing tastes of the readership – to go all in making $30-40k a year when I’ve spent this long slogging to get to $100k through a combined workaholic income stream of novels, day job, and freelancing. You don’t give all that up just because you had one positive year.

If I’ve learned anything about publishing it’s that you should always hope that one great year is the start of an upward trend – but you should never count on it.

I was poor in 2007. I have no interest in going back if I can help it.

And that’s why I’m not quitting my day job.

Link to the rest at Kameron Hurley and thanks to Margaret for the tip.

Here’s a link to Kameron Hurley’s books

Oh noes, the sky is falling

29 January 2015

From Mad Genius Club:

On  one of the mailing lists I belong to, someone commented about how Publishers Weekly was basically declaring the imminent death of science fiction. According to PW, sales of SF were down 21% in 2013 and another 7% in 2014. In other words, SF sales were down approximately 4.14 million units and now is smaller than the graphic novel market. Needless to say, yours truly (as well as everyone else on the list including the person who posted it) met those numbers with skepticism. My concern about the accuracy of the report came not only because it was from PW but also because there was no breakdown as to whether this was talking print only, print and e-book sales and how those numbers were gathered.

So, yours truly went searching for more information this morning and surprise, surprise. It turns out we were right to be skeptical. It seems that those numbers come from Bookscan. You know, our friendly neighborhood sales reporter that doesn’t count every sale from every outlet but uses handwavium to figure out what title has sold how many units. Bookscan that doesn’t track every title, as in most indie titles aren’t included. Bookscan that is iffy at best when it comes to reporting e-book sales. But, if we are to take PW seriously, we are to worry about the decline in demand for science fiction.

Sorry, but no. If PW and those looking at the figures and wringing their hands would know if they simply took a little time to think about it, all these figures show is that people are tired of what is coming out of most traditional publishing houses when it comes to SF.

. . . .

I went to Amazon and checked the top 10 best sellers. It didn’t surprise me at all to see that, out of the top 10 in SF best selling e-books, only three were from from traditional publishers and one of those is a reprint. If you continue looking at the rest of the titles in the Top 100, you find that the vast majority of them are either small press or indie published books. That should say something. The lesson there is that science fiction is not dead. Far from it in fact.

That isn’t to say that the numbers PW posted are completely wrong or that those reading them see a decline in SF sales. Where they are wrong is in how they interpret the numbers.

Link to the rest at Mad Genius Club and thanks to Dave for the tip.

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